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Business Wire
an hour ago
- Business
- Business Wire
Graco Reports Second Quarter Results
MINNEAPOLIS--(BUSINESS WIRE)--Graco Inc. (NYSE: GGG) today announced results for the second quarter ended June 27, 2025. Summary $ in millions except per share amounts (1) Excludes the impact of excess tax benefits from stock option exercises. See Financial Results Adjusted for Comparability below for a reconciliation of adjusted non-GAAP financial measures to GAAP. Expand Net sales for the second quarter increased 3 percent. Incremental sales from acquired operations contributed 6 percentage points of sales growth. EMEA and Asia Pacific sales growth was partially offset by a decrease in the Americas. The gross profit margin rate declined approximately 2 percentage points for the second quarter due to higher product costs, including $4 million of increased tariff costs, and the unfavorable effects of lower margin rates from acquired operations. Total operating expenses for the second quarter increased 2 percentage points, including a total of 7 percentage points from acquired operations. Excluding the impact of acquired operations, operating expenses decreased $7 million (5 percentage points). Other non-operating income decreased $3 million for the quarter, mostly due to $5 million of exchange losses on net liabilities of certain foreign operations and lower interest income. Net earnings decreased 4 percent for the second quarter due to a lower gross margin rate and lower non-operating income. Other notable items for the year to date included an increase in cash flow from operations of $50 million to $308 million, primarily reflective of reductions in inventory levels. Year-to-date share repurchases totaled 4.4 million shares for $361 million. "Overall sales were up 3% in the quarter despite an organic revenue decline of 3%, primarily due to lower sales in the Contractor segment," said Mark Sheahan, Graco's President and Chief Executive Officer. "The Contractor segment organic sales decline was driven by softness in the North American construction markets, cautious channel and contractor investment, and reduced foot traffic in the home centers. The Americas drove the organic revenue decline as we saw growth in volume in both the EMEA and Asia Pacific regions. In addition, sales of powder finishing equipment continued to be strong during the quarter with improved activity in China." Consolidated Results Net sales for the second quarter increased 3 percent from the comparable period last year. Second quarter net sales decreased 3 percent in the Americas, increased 19 percent in EMEA (14 percent at consistent translation rates), and increased 12 percent in Asia Pacific (13 percent at consistent translation rates). Year-to-date net sales increased 5 percent compared to last year (6 percent at consistent translation rates). Year-to-date net sales increased 1 percent in the Americas, increased 14 percent in EMEA (13 percent at consistent translation rates), and increased 12 percent in Asia Pacific (14 percent at consistent translation rates). Changes in currency translation rates increased worldwide sales by $4 million for the second quarter and decreased worldwide sales by $3 million for the year to date. Acquired operations contributed $32 million of sales growth for the second quarter and $62 million of sales growth for the year to date. The gross profit margin rate declined approximately 2 percentage points for both the second quarter and year to date from the comparable periods last year due to higher product costs, including $4 million of increased tariff costs, and the unfavorable effects of lower margin rates from acquired operations. Total operating expenses increased $3 million (2 percent) for the second quarter and $3 million (1 percent) for the year to date, respectively, compared to last year. Incremental expenses from acquired operations of $9 million for the quarter and $19 million for the year to date were partially offset by decreases in product development spending, sales and earnings-based incentives and share-based compensation. The second quarter and year to date periods last year included $3 million of expenses associated with the relocation to a new distribution center. Other non-operating income decreased $3 million for both the second quarter and year to date from the comparable periods last year and included exchange losses on net liabilities of certain foreign operations of $5 million for the quarter and $8 million for the year to date. Favorable market valuation changes on investments held to fund certain retirement benefits partially offset these exchange losses. Other income for the year to date included a $5 million gain in the first quarter from the sale of a former manufacturing and distribution facility in Switzerland. The effective income tax rate was 19 percent for both the second quarter and the year to date. Adjusted to exclude the impacts of excess tax benefits from stock option exercises (see Financial Results Adjusted for Comparability below), the adjusted effective income tax rate of 20 percent for both the quarter and year to date was comparable to the respective periods last year. Segment Results Management assesses performance of segments by reference to operating earnings excluding unallocated corporate expenses. For a reconciliation of segment operating earnings to consolidated operating earnings, refer to the segment information table included in the financial statement section of this release. Certain measurements of segment operations are summarized below: Components of net sales change by geographic region for the Contractor segment were as follows: Incremental sales from acquired operations in the Contractor segment for the quarter and year to date were partially offset by weakness in worldwide construction markets, particularly in North America. The operating margin rate declined 5 percentage points for the quarter and year to date, including 3 percentage points from higher product costs, mainly due to increased tariffs, and 2 percentage points from the unfavorable effects of lower margin rates of acquired operations. Components of net sales change by geographic region for the Industrial segment were as follows: Industrial segment sales for the second quarter were flat and increased 2 percentage points for the year to date as favorable volumes in EMEA and Asia Pacific offset decreased sales in the Americas. The operating margin rate for this segment was flat for the quarter as realized pricing offset unfavorable product and channel mix and higher product costs. The year to date operating margin increased 1 percentage point as realized pricing and lower expenses more than offset higher product costs. Components of net sales change by geographic region for the Expansion Markets segment were as follows: Expansion Market net sales decreased for the second quarter as continued sales growth in the semiconductor product application was more than offset by decreased sales in the environmental product application. For the year to date, double-digit sales growth in the semiconductor product application more than offset softness in other applications. The operating margin rate for this segment increased for both the quarter and year to date driven by increased sales volume and lower expenses. Outlook "Component costs have risen due to tariffs introduced this quarter," said Sheahan. "To help offset these higher costs, we will implement a targeted price increase beginning in September. Although the timing of this action differs from our usual approach, it is a necessary response to the current trade environment facing industrial manufacturers and should help mitigate the effects of the tariffs. This pricing decision, along with our upcoming new product launches and the steady order rates we saw throughout the quarter, gives us confidence in our previous guidance for the rest of the year. We are maintaining our 2025 revenue outlook of low single-digit sales growth on an organic constant-currency basis." Financial Results Adjusted for Comparability Excluding the impact of excess tax benefits from stock option exercises presents a more consistent basis for comparison of financial results. A calculation of the non-GAAP adjusted measurements of income taxes, effective income tax rate, net earnings and diluted earnings per share follows (in millions except per share amounts): Cautionary Statement Regarding Forward-Looking Statements The Company desires to take advantage of the 'safe harbor' provisions regarding forward-looking statements of the Private Securities Litigation Reform Act of 1995 and is filing this Cautionary Statement in order to do so. From time to time various forms filed by our Company with the Securities and Exchange Commission, including our Form 10-K, Form 10-Qs and Form 8-Ks, and other disclosures, including our 2024 Overview report, press releases, earnings releases, analyst briefings, conference calls and other written documents or oral statements released by our Company, may contain forward-looking statements. Forward-looking statements generally use words such as 'expect,' 'foresee,' 'anticipate,' 'believe,' 'project,' 'should,' 'estimate,' 'will,' and similar expressions, and reflect our Company's expectations concerning the future. All forecasts and projections are forward-looking statements. Forward-looking statements are based upon currently available information, but various risks and uncertainties may cause our Company's actual results to differ materially from those expressed in these statements. The Company undertakes no obligation to update these statements in light of new information or future events. Future results could differ materially from those expressed, due to the impact of changes in various factors. These risk factors include, but are not limited to, risks relating to the demand for our products and the level of commercial and industrial activity worldwide; changes in currency translation rates; international and domestic instability; interest rate fluctuations and changes in credit markets; global sourcing of materials; interruptions of or intrusions into our information systems; intellectual property rights; the use of generative artificial intelligence; conducting business internationally; catastrophic events; our ability to attract, develop and retain qualified personnel; public health crises; our growth strategies and acquisitions; potential goodwill impairment; our ability to compete effectively; our dependence on a few large customers; our dependence on cyclical industries; changes in laws and regulations; climate-related laws, regulations and accords; environmental, social and governance-related expectations and requirements; compliance with anti-corruption and trade laws; changes in tax or tariff rates or the adoption of new tax or tariff legislation; and costs associated with legal proceedings. Please refer to Item 1A of our Annual Report on Form 10-K for fiscal year 2024 (and the most recent Form 10-Q) for a more comprehensive discussion of these and other risk factors. These reports are available on the Company's website at and the Securities and Exchange Commission's website at Shareholders, potential investors and other readers are urged to consider these factors in evaluating forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Investors should realize that factors other than those identified above and in Item 1A of our Annual Report on Form 10-K for fiscal year 2024 might prove important to the Company's future results. It is not possible for management to identify each and every factor that may have an impact on the Company's operations in the future as new factors can develop from time to time. Conference Call Graco management will hold a conference call, including slides via webcast, with analysts and institutional investors on Thursday, July 24, 2025, at 11 a.m. ET, 10 a.m. CT, to discuss Graco's second quarter results. A real-time listen-only webcast of the conference call will be broadcast by Nasdaq. Individuals can access the call and view the slides on the Company's website at Listeners should go to the website at least 15 minutes prior to the live conference call to install any necessary audio software. About Graco Graco Inc. supplies technology and expertise for the management of fluids and coatings in both industrial and commercial applications. It designs, manufactures and markets systems and equipment to move, measure, control, dispense and spray fluid and powder materials. A recognized leader in its specialties, Minneapolis-based Graco serves customers around the world in the manufacturing, processing, construction and maintenance industries. For additional information about Graco Inc., please visit us at SEGMENT INFORMATION (Unaudited) (In thousands) Three Months Ended Six Months Ended Jun 27, 2025 Jun 28, 2024 Jun 27, 2025 Jun 28, 2024 Net Sales Contractor $ 288,959 $ 269,638 $ 543,991 $ 499,680 Industrial 242,277 241,878 473,930 466,738 Expansion Markets 40,570 41,727 82,169 79,014 Total $ 571,806 $ 553,243 $ 1,100,090 $ 1,045,432 Operating Earnings Contractor $ 75,489 $ 84,362 $ 137,419 $ 150,503 Industrial 82,372 81,564 161,967 154,653 Expansion Markets 8,829 8,435 18,894 15,187 Unallocated corporate (expense) (9,206 ) (13,002 ) (16,783 ) (25,988 ) Total $ 157,484 $ 161,359 $ 301,497 $ 294,355 Expand
Yahoo
7 hours ago
- Business
- Yahoo
Medtronic's (MDT) Role in Medical Devices: A Unique Fit for Halal Portfolios
Medtronic plc (NYSE:MDT) is included among the 11 Best Halal Dividend Stocks to Buy Now. A surgeon in a modern operating room holding advanced medical devices with a sense of purpose and accuracy. Medtronic plc (NYSE:MDT) has maintained steady revenue and earnings over the years, demonstrating a track record of reliable performance. The company appears well-positioned to continue generating solid returns over time. This confidence stems from its strong innovation capabilities, established presence in the complex healthcare industry, and favorable long-term trends such as the global rise in aging populations. In fiscal Q4 2024, Medtronic plc (NYSE:MDT) reported revenue of $8.93 billion, which showed a 4% growth from the same period last year. The revenue also beat analysts' estimates by $98.2 million. The company posted a GAAP operating profit of $1.436 billion and an operating margin of 16.1%, reflecting year-over-year increases of 36% and 380 basis points, respectively. Medtronic plc (NYSE:MDT)'s cash position remained stable in FY25. The company's operating cash flow for the year was $7 billion, and its free cash flow amounted to $5.2 billion. It ended the year with $2.2 billion available in cash and cash equivalents. The company offers a quarterly dividend of $0.71 per share, having raised it by 1.4% in May. This marked the company's 48th consecutive year of dividend growth, which makes it one of the best halal stocks that pay dividends. As of July 18, the stock has a dividend yield of 3.17%. While we acknowledge the potential of MDT as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: and . Disclosure: None.
Yahoo
10 hours ago
- Business
- Yahoo
Fiserv Reports Second Quarter 2025 Results
GAAP revenue growth of 8% in the quarter and 7% year to date;GAAP EPS increased 22% in both the quarter and year to date;Organic revenue growth of 8% in both the quarter and year to date;Adjusted EPS increased 16% in the quarter and 15% year to date;Company refines 2025 organic revenue growth outlook to approximately 10%and adjusted EPS outlook to $10.15 to $10.30, or growth of 15% to 17% MILWAUKEE, July 23, 2025--(BUSINESS WIRE)--Fiserv, Inc. (NYSE: FI), a leading global provider of payments and financial services technology solutions, today reported financial results for the second quarter of 2025. Second Quarter 2025 GAAP Results GAAP revenue for the company increased 8% to $5.52 billion in the second quarter of 2025 compared to the prior year period, with 10% growth in the Merchant Solutions segment and 7% growth in the Financial Solutions segment. GAAP revenue for the company increased 7% to $10.65 billion in the first six months of 2025 compared to the prior year period, with 8% growth in the Merchant Solutions segment and 7% growth in the Financial Solutions segment. GAAP earnings per share was $1.86 in the second quarter and $3.36 in the first six months of 2025, an increase of 22% compared to both the second quarter and first six months of 2024. GAAP operating margin was 30.7% and 29.0% in the second quarter and first six months of 2025 compared to 28.0% and 26.1% in the second quarter and first six months of 2024. GAAP operating margin in the Merchant Solutions segment was 34.6% and 34.4% in the second quarter and first six months of 2025 compared to 36.6% and 35.4% in the second quarter and first six months of 2024. GAAP operating margin in the Financial Solutions segment was 48.7% and 48.1% in the second quarter and first six months of 2025 compared to 45.9% and 45.0% in the second quarter and first six months of 2024. Net cash provided by operating activities was $2.31 billion in the first six months of 2025 compared to $2.17 billion in the prior year period. "Our second quarter results of 8% organic revenue growth and 16% adjusted earnings per share growth again demonstrated the power of our diverse business serving both merchants and financial institutions," said Mike Lyons, Chief Executive Officer of Fiserv. "We continue to make progress on our key strategic initiatives focused on client-centric innovation, deepening client relationships, and operational efficiency, to drive strong and durable performance." Second Quarter 2025 Non-GAAP Results and Additional Information Adjusted revenue increased 8% to $5.20 billion in the second quarter and 7% to $9.98 billion in the first six months of 2025 compared to the prior year periods. Organic revenue growth was 8% in the second quarter of 2025, led by 9% growth in the Merchant Solutions segment and 7% growth in the Financial Solutions segment. Organic revenue growth was 8% in the first six months of 2025, led by 9% growth in the Merchant Solutions segment and 6% growth in the Financial Solutions segment. Adjusted earnings per share increased 16% to $2.47 in the second quarter and 15% to $4.61 in the first six months of 2025 compared to the prior year periods. Adjusted operating margin increased 120 basis points to 39.6% in the second quarter and 150 basis points to 38.7% in the first six months of 2025 compared to the prior year periods. Adjusted operating margin was 34.6% and 36.6% in the Merchant Solutions segment and 48.7% and 45.9% in the Financial Solutions segment in the second quarter of 2025 and 2024, respectively. Adjusted operating margin was 34.4% and 35.4% in the Merchant Solutions segment and 48.1% and 45.0% in the Financial Solutions segment in the first six months of 2025 and 2024, respectively. Free cash flow was $1.54 billion in the first six months of 2025 compared to $1.48 billion in the prior year period. The company repurchased 12.2 million shares of common stock for $2.2 billion in the second quarter and 21.9 million shares of common stock for $4.4 billion in the first six months of 2025. The company completed a public offering of 2.175 billion Euros of 3-year, 7-year and 11-year senior notes with a weighted average coupon rate of 3.43%. In June 2025, the company entered into an agreement to acquire the remaining 49.9% ownership interest in AIB Merchant Services, an Ireland-based payments solution provider. In June 2025, the company announced plans to launch a new digital asset platform, including a new stablecoin (FIUSD), that allows financial institutions and merchants to access digital assets through a simple, secure and scalable solution. Fiserv was named to CNBC's World's Top Fintech Companies for 2025, for the third consecutive year, as well as to the TIME100 Most Influential Companies 2025 list. Outlook for 2025 Fiserv refines organic revenue growth outlook to approximately 10% and adjusted earnings per share to $10.15 to $10.30, representing growth of 15% to 17%, for 2025. "We made several refinements to our guidance based on our year-to-date performance and current business activity levels," said Lyons. "We are encouraged by our strong pipeline, recent client wins, and the quality of our strategic initiatives, and expect to deliver Fiserv's 40th consecutive year of double-digit adjusted earnings per share growth." Earnings Conference Call The company will discuss its second quarter 2025 results in a live webcast at 7 a.m. CT on Wednesday, July 23, 2025. The webcast, along with supplemental financial information, can be accessed on the investor relations section of the Fiserv website at A replay will be available approximately one hour after the conclusion of the live webcast. About Fiserv Fiserv, Inc. (NYSE: FI), a Fortune 500™ company, moves more than money. As a global leader in payments and financial technology, the company helps clients achieve best-in-class results through a commitment to innovation and excellence in areas including account processing and digital banking solutions; card issuer processing and network services; payments; e-commerce; merchant acquiring and processing; and Clover®, the world's smartest point-of-sale system and business management platform. Fiserv is a member of the S&P 500® Index and one of Fortune® World's Most Admired Companies™. Visit and follow on social media for more information and the latest company news. Use of Non-GAAP Financial Measures In this news release, the company supplements its reporting of information determined in accordance with generally accepted accounting principles ("GAAP"), such as revenue, operating income, operating margin, net income attributable to Fiserv, diluted earnings per share and net cash provided by operating activities, with "adjusted revenue," "adjusted revenue growth," "organic revenue," "organic revenue growth," "adjusted operating income," "adjusted operating margin," "adjusted net income," "adjusted earnings per share," "adjusted earnings per share growth," and "free cash flow." Management believes that adjustments for certain non-cash or other items and the exclusion of certain pass-through revenue and expenses should enhance shareholders' ability to evaluate the company's performance, as such measures provide additional insights into the factors and trends affecting its business. Therefore, the company excludes these items from its GAAP financial measures to calculate these unaudited non-GAAP measures. The corresponding reconciliations of these unaudited non-GAAP financial measures to the most comparable GAAP measures are included in this news release, except for forward-looking measures where a reconciliation to the corresponding GAAP measures is not available due to the variability, complexity and limited visibility of the non-cash and other items described below that are excluded from the non-GAAP outlook measures. See pages 14-16 for additional information regarding the company's forward-looking non-GAAP financial measures. Examples of non-cash or other items may include, but are not limited to, non-cash intangible asset amortization expense associated with acquisitions; non-cash impairment charges; merger and integration costs; severance costs; gains or losses from the sale of businesses, certain assets or investments; and certain discrete tax benefits and expenses. The company excludes these items to more clearly focus on the factors management believes are pertinent to the company's operations, and management uses this information to make operating decisions, including the allocation of resources to the company's various businesses. The company adjusts its non-GAAP results to exclude amortization of acquisition-related intangible assets as such amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions. Management believes that the adjustment of acquisition-related intangible asset amortization supplements GAAP information with a measure that can be used to assess the comparability of operating performance. Although the company excludes amortization from acquisition-related intangible assets from its non-GAAP expenses, management believes that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation. Management believes organic revenue growth is useful because it presents revenue growth excluding the impact of foreign currency fluctuations, acquisitions, dispositions and the impact of the company's postage reimbursements. Management believes free cash flow is useful to measure the funds generated in a given period that are available for debt service requirements and strategic capital decisions. Management believes this supplemental information enhances shareholders' ability to evaluate and understand the company's core business performance. These unaudited non-GAAP measures may not be comparable to similarly titled measures reported by other companies and should be considered in addition to, and not as a substitute for, revenue, operating income, operating margin, net income attributable to Fiserv, diluted earnings per share and net cash provided by operating activities or any other amount determined in accordance with GAAP. Forward-Looking Statements This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding anticipated organic revenue growth, adjusted earnings per share, adjusted earnings per share growth and other statements regarding our future financial performance. Statements can generally be identified as forward-looking because they include words such as "believes," "anticipates," "expects," "could," "should," "confident," "likely," "plan," or words of similar meaning. Statements that describe the company's future plans, outlook, objectives or goals are also forward-looking statements. Forward-looking statements are subject to assumptions, risks and uncertainties that may cause actual results to differ materially from those contemplated by such forward-looking statements. The factors that could cause the company's actual results to differ materially include, among others, the following: the company's ability to compete effectively against new and existing competitors and to continue to introduce competitive new products and services on a timely, cost-effective basis; changes in customer demand for the company's products and services; the ability of the company's technology to keep pace with a rapidly evolving marketplace; the success of the company's merchant alliances, some of which are not controlled by the company; the impact of a security breach or operational failure on the company's business, including disruptions caused by other participants in the global financial system; losses due to chargebacks, refunds or returns as a result of fraud or the failure of the company's vendors and merchants to satisfy their obligations; changes in local, regional, national and international economic or political conditions, including those resulting from heightened inflation, rising interest rates, taxes, trade policies and tariffs, a recession, bank failures, or intensified international hostilities, and the impact they may have on the company and its employees, clients, vendors, supply chain, operations and sales; the effect of proposed and enacted legislative and regulatory actions affecting the company or the financial services industry as a whole; the company's ability to comply with government regulations and applicable card association and network rules; the protection and validity of intellectual property rights; the outcome of pending and future litigation and governmental proceedings; the company's ability to successfully identify, complete and integrate acquisitions, and to realize the anticipated benefits associated with the same; the impact of the company's growth strategies; the company's ability to attract and retain key personnel; adverse impacts from currency exchange rates or currency controls; changes in corporate tax and interest rates; and other factors included in "Risk Factors" in the company's Annual Report on Form 10-K for the year ended December 31, 2024, and in other documents that the company files with the Securities and Exchange Commission, which are available at You should consider these factors carefully in evaluating forward-looking statements and are cautioned not to place undue reliance on such statements. The company assumes no obligation to update any forward-looking statements, which speak only as of the date of this news release. Fiserv, Inc. Condensed Consolidated Statements of Income (In millions, except per share amounts, unaudited) Three Months EndedJune 30, Six Months EndedJune 30, 2025 2024 2025 2024 Revenue Processing and services $ 4,304 $ 4,140 $ 8,349 $ 8,140 Product 1,212 967 2,297 1,850 Total revenue 5,516 5,107 10,646 9,990 Expenses Cost of processing and services 1,412 1,343 2,801 2,697 Cost of product 694 639 1,378 1,290 Selling, general and administrative 1,711 1,697 3,393 3,394 Net loss (gain) on sale of other assets 3 — (17 ) — Total expenses 3,820 3,679 7,555 7,381 Operating income 1,696 1,428 3,091 2,609 Interest expense, net (365 ) (285 ) (696 ) (546 ) Other expense, net (39 ) (5 ) (57 ) (12 ) Income before income taxes and loss from investments in unconsolidated affiliates 1,292 1,138 2,338 2,051 Income tax provision (246 ) (221 ) (436 ) (374 ) Loss from investments in unconsolidated affiliates (16 ) (8 ) (24 ) (16 ) Net income 1,030 909 1,878 1,661 Less: net income attributable to noncontrolling interests 4 15 1 32 Net income attributable to Fiserv $ 1,026 $ 894 $ 1,877 $ 1,629 GAAP earnings per share attributable to Fiserv — diluted $ 1.86 $ 1.53 $ 3.36 $ 2.76 Diluted shares used in computing earnings per share attributable to Fiserv 552.7 585.4 558.7 590.1 Earnings per share is calculated using actual, unrounded amounts. Fiserv, Inc. Reconciliation of GAAP to Adjusted Net Income and Adjusted Earnings Per Share (In millions, except per share amounts, unaudited) Three Months EndedJune 30, Six Months EndedJune 30, 2025 2024 2025 2024 GAAP net income attributable to Fiserv $ 1,026 $ 894 $ 1,877 $ 1,629 Adjustments: Merger and integration costs 1 8 22 23 59 Severance costs 14 21 29 63 Amortization of acquisition-related intangible assets 2 341 370 672 739 Non wholly-owned entity activities 3 9 26 29 54 Tax impact of adjustments 4 (73 ) (88 ) (147 ) (183 ) Incremental executive compensation 5 — — 52 — Argentine Peso devaluation 6 39 — 39 — Adjusted net income $ 1,364 $ 1,245 $ 2,574 $ 2,361 GAAP earnings per share attributable to Fiserv - diluted $ 1.86 $ 1.53 $ 3.36 $ 2.76 Adjustments - net of income taxes: Merger and integration costs 1 0.01 0.03 0.03 0.08 Severance costs 0.02 0.03 0.04 0.09 Amortization of acquisition-related intangible assets 2 0.50 0.50 0.97 1.00 Non wholly-owned entity activities 3 0.01 0.04 0.04 0.07 Incremental executive compensation 5 — — 0.09 — Argentine Peso devaluation 6 0.07 — 0.07 — Adjusted earnings per share $ 2.47 $ 2.13 $ 4.61 $ 4.00 GAAP earnings per share attributable to Fiserv growth 22 % 22 % Adjusted earnings per share growth 16 % 15 % See pages 3-4 for disclosures related to the use of non-GAAP financial measures. Earnings per share is calculated using actual, unrounded amounts. 1 Represents acquisition and related integration costs incurred in connection with acquisitions. Merger and integration costs associated with integration activities include $3 million and $5 million of third-party professional service fees in the second quarter and first six months of 2025, respectively, as well as $11 million related to a legal settlement in the first six months of 2025. Merger and integration costs associated with integration activities in the second quarter and first six months of 2024 primarily include $13 million and $22 million of share-based compensation, as well as $13 million of third-party professional service fees in the first six months of 2024. 2 Represents amortization of intangible assets acquired through acquisition, including customer relationships, software/technology and trade names. This adjustment does not exclude the amortization of other intangible assets such as contract costs (sales commissions and deferred conversion costs), capitalized and purchased software, financing costs and debt discounts. See additional information on page 13 for an analysis of the company's amortization expense. 3 Represents the company's share of amortization of acquisition-related intangible assets at its unconsolidated affiliates, as well as the minority interest share of amortization of acquisition-related intangible assets at its subsidiaries in which the company holds a controlling financial interest. 4 The tax impact of adjustments is calculated using a tax rate of 19.5% and 20% in the first six months of 2025 and 2024, respectively, which approximates the company's anticipated annual effective tax rates. 5 Represents incremental compensation expense associated with the transition of the company's Chief Executive Officer ("CEO"), comprised of $40 million of former CEO non-cash share-based compensation and related employer payroll taxes, and a $12 million cash replacement award paid to the company's newly appointed CEO. 6 The Argentine government announced economic policy changes, including the removal of certain currency controls, resulting in a significant devaluation of the Argentine Peso on April 14, 2025. This adjustment represents the corresponding one-day foreign currency exchange loss from the remeasurement of the company's Argentina subsidiary's monetary assets and liabilities in Argentina's highly inflationary economy. Fiserv, Inc. Financial Results by Segment (In millions, unaudited) Three Months EndedJune 30, Six Months EndedJune 30, 2025 2024 2025 2024 Total Company Revenue $ 5,516 $ 5,107 $ 10,646 $ 9,990 Adjustments: Postage reimbursements (320 ) (313 ) (661 ) (653 ) Adjusted revenue $ 5,196 $ 4,794 $ 9,985 $ 9,337 Operating income $ 1,696 $ 1,428 $ 3,091 $ 2,609 Adjustments: Merger and integration costs 8 22 23 59 Severance costs 14 21 29 63 Amortization of acquisition-related intangible assets 341 370 672 739 Incremental executive compensation — — 52 — Adjusted operating income $ 2,059 $ 1,841 $ 3,867 $ 3,470 Operating margin 30.7 % 28.0 % 29.0 % 26.1 % Adjusted operating margin 39.6 % 38.4 % 38.7 % 37.2 % Merchant Solutions ("Merchant") 1 Revenue $ 2,644 $ 2,410 $ 5,016 $ 4,663 Operating income $ 914 $ 882 $ 1,724 $ 1,651 Operating margin 34.6 % 36.6 % 34.4 % 35.4 % Financial Solutions ("Financial") 1 Revenue $ 2,552 $ 2,379 $ 4,969 $ 4,664 Operating income $ 1,244 $ 1,093 $ 2,392 $ 2,101 Operating margin 48.7 % 45.9 % 48.1 % 45.0 % Corporate and Other Revenue $ 320 $ 318 $ 661 $ 663 Adjustments: Postage reimbursements (320 ) (313 ) (661 ) (653 ) Adjusted revenue $ — $ 5 $ — $ 10 Operating loss $ (462 ) $ (547 ) $ (1,025 ) $ (1,143 ) Adjustments: Merger and integration costs 8 22 23 59 Severance costs 14 21 29 63 Amortization of acquisition-related intangible assets 341 370 672 739 Incremental executive compensation ... — — 52 — Adjusted operating loss $ (99 ) $ (134 ) $ (249 ) $ (282 ) See pages 3-4 for disclosures related to the use of non-GAAP financial measures. Operating margin percentages are calculated using actual, unrounded amounts. 1 For all periods presented in the Merchant and Financial segments, there were no adjustments to GAAP measures presented and thus the adjusted measures are equal to the GAAP measures presented. Fiserv, Inc. Condensed Consolidated Statements of Cash Flows (In millions, unaudited) Six Months Ended June 30, 2025 2024 Cash flows from operating activities Net income $ 1,878 $ 1,661 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and other amortization 897 815 Amortization of acquisition-related intangible assets 673 744 Amortization of financing costs and debt discounts 22 22 Share-based compensation 215 185 Deferred income taxes (215 ) (207 ) Net gain on sale of other assets (17 ) — Loss from investments in unconsolidated affiliates 24 16 Distributions from unconsolidated affiliates 22 19 Non-cash foreign currency exchange losses 65 50 Other operating activities (6 ) (15 ) Changes in assets and liabilities, net of effects from acquisitions: Trade accounts receivable (280 ) (176 ) Prepaid expenses and other assets (612 ) (420 ) Contract costs (121 ) (104 ) Accounts payable and other liabilities (272 ) (448 ) Contract liabilities 40 30 Net cash provided by operating activities 2,313 2,172 Cash flows from investing activities Capital expenditures, including capitalized software and other intangibles (814 ) (768 ) Payments for acquisition of businesses, net of cash acquired (337 ) — Merchant cash advances, net (539 ) (451 ) Distributions from unconsolidated affiliates 13 39 Purchases of investments (41 ) (35 ) Proceeds from sale of investments 474 8 Other investing activities (19 ) — Net cash used in investing activities (1,263 ) (1,207 ) Cash flows from financing activities Debt proceeds 3,679 3,189 Debt repayments (2,360 ) (1,457 ) Net borrowings from commercial paper and short-term borrowings 1,925 532 Payments of debt financing costs (5 ) (14 ) Proceeds from issuance of treasury stock 37 58 Purchases of treasury stock, including employee shares withheld for tax obligations (4,642 ) (3,230 ) Settlement activity, net 200 (150 ) Distributions paid to noncontrolling interests and redeemable noncontrolling interest — (41 ) Payment to acquire noncontrolling interest of consolidated subsidiary (22 ) — Other financing activities 22 (1 ) Net cash used in financing activities (1,166 ) (1,114 ) Effect of exchange rate changes on cash and cash equivalents 92 (12 ) Net change in cash and cash equivalents (24 ) (161 ) Cash and cash equivalents, beginning balance 2,993 2,963 Cash and cash equivalents, ending balance $ 2,969 $ 2,802 Fiserv, Inc. Condensed Consolidated Balance Sheets (In millions, unaudited) June 30, December 31, 2025 2024 Assets Cash and cash equivalents $ 999 $ 1,236 Trade accounts receivable – net 4,116 3,725 Prepaid expenses and other current assets 3,805 3,087 Settlement assets 17,554 15,429 Total current assets 26,474 23,477 Property and equipment – net 2,585 2,374 Customer relationships – net 5,538 5,868 Other intangible assets – net 4,880 4,072 Goodwill 37,465 36,584 Contract costs – net 1,005 996 Investments in unconsolidated affiliates 1,071 1,506 Other long-term assets 2,513 2,299 Total assets $ 81,531 $ 77,176 Liabilities and Equity Accounts payable and other current liabilities $ 4,351 $ 4,799 Short-term and current maturities of long-term debt 1,528 1,110 Contract liabilities 885 819 Settlement obligations 17,554 15,429 Total current liabilities 24,318 22,157 Long-term debt 28,059 23,730 Deferred income taxes 2,189 2,477 Long-term contract liabilities 249 263 Other long-term liabilities 953 863 Total liabilities 55,768 49,490 Fiserv shareholders' equity 25,215 27,068 Noncontrolling interests 548 618 Total equity 25,763 27,686 Total liabilities and equity $ 81,531 $ 77,176 Fiserv, Inc. Selected Non-GAAP Financial Measures and Additional Information (In millions, unaudited) Organic Revenue Growth 1 Three Months EndedJune 30, Six Months EndedJune 30, 2025 2024 Growth 2025 2024 Growth Total Company Adjusted revenue $ 5,196 $ 4,794 $ 9,985 $ 9,337 Currency impact 2 47 — 124 — Acquisition adjustments (65 ) — (76 ) — Divestiture adjustments — (5 ) — (10 ) Organic revenue $ 5,178 $ 4,789 8% $ 10,033 $ 9,327 8% Merchant Adjusted revenue $ 2,644 $ 2,410 $ 5,016 $ 4,663 Currency impact 2 49 — 118 — Acquisition adjustments (55 ) — (63 ) — Organic revenue $ 2,638 $ 2,410 9% $ 5,071 $ 4,663 9% Financial Adjusted revenue $ 2,552 $ 2,379 $ 4,969 $ 4,664 Currency impact 2 (2 ) — 6 — Acquisition adjustments (10 ) — (13 ) — Organic revenue $ 2,540 $ 2,379 7% $ 4,962 $ 4,664 6% Corporate and Other Adjusted revenue $ — $ 5 $ — $ 10 Divestiture adjustments — (5 ) — (10 ) Organic revenue $ — $ — $ — $ — See pages 3-4 for disclosures related to the use of non-GAAP financial measures. Organic revenue growth is calculated using actual, unrounded amounts. 1 Organic revenue growth is measured as the change in adjusted revenue (see page 9) for the current period excluding the impact of foreign currency fluctuations and revenue attributable to acquisitions and dispositions, divided by adjusted revenue from the prior period excluding revenue attributable to dispositions. 2 Currency impact is measured as the increase or decrease in adjusted revenue for the current period by applying prior period foreign currency exchange rates to present a constant currency comparison to prior periods. Fiserv, Inc. Selected Non-GAAP Financial Measures and Additional Information (cont.) (In millions, unaudited) Free Cash Flow Six Months EndedJune 30, 2025 2024 Net cash provided by operating activities $ 2,313 $ 2,172 Capital expenditures (814 ) (768 ) Adjustments: Distributions paid to noncontrolling interests and redeemable noncontrolling interest — (41 ) Distributions from unconsolidated affiliates included in cash flows from investing activities 13 39 Severance, merger and integration payments 80 96 Tax payments on adjustments (16 ) (19 ) Other (31 ) — Free cash flow $ 1,545 $ 1,479 Total Amortization 1 Three Months EndedJune 30, Six Months EndedJune 30, 2025 2024 2025 2024 Acquisition-related intangible assets $ 342 $ 371 $ 673 $ 744 Capitalized software and other intangibles 188 156 364 300 Purchased software 51 59 103 118 Financing costs and debt discounts 11 11 22 22 Sales commissions 30 27 58 55 Deferred conversion costs 29 25 56 49 Total amortization $ 651 $ 649 $ 1,276 $ 1,288 See pages 3-4 for disclosures related to the use of non-GAAP financial measures. 1 The company adjusts its non-GAAP results to exclude amortization of acquisition-related intangible assets as such amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions. Management believes that the adjustment of acquisition-related intangible asset amortization supplements the GAAP information with a measure that can be used to assess the comparability of operating performance. Although the company excludes amortization from acquisition-related intangible assets from its non-GAAP expenses, management believes that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation. Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Any future acquisitions may result in the amortization of additional intangible assets. Fiserv, Inc. Full Year Forward-Looking Non-GAAP Financial Measures Reconciliations of unaudited non-GAAP financial measures to the most comparable GAAP measures are included in this news release, except for forward-looking measures where a reconciliation to the corresponding GAAP measures is not available due to the variability, complexity and limited visibility of these items that are excluded from the non-GAAP outlook measures. The company's forward-looking non-GAAP financial measures for 2025, including organic revenue growth, adjusted earnings per share and adjusted earnings per share growth, are designed to enhance shareholders' ability to evaluate the company's performance by excluding certain items to focus on factors and trends affecting its business. Organic Revenue Growth - The company's organic revenue growth outlook for 2025 excludes the impact of foreign currency fluctuations, acquisitions, dispositions and the impact of the company's postage reimbursements. The currency impact is measured as the increase or decrease in the expected adjusted revenue for the period by applying prior period foreign currency exchange rates to present a constant currency comparison to prior periods. Growth 2025 Revenue 10.0% Postage reimbursements —% 2025 Adjusted revenue 10.0% Currency impact 1.0% Acquisition adjustments (1.0)% Divestiture adjustments —% 2025 Organic revenue ~ 10% Adjusted Earnings Per Share - The company's adjusted earnings per share outlook for 2025 excludes certain non-cash or other items such as non-cash intangible asset amortization expense associated with acquisitions; non-cash impairment charges; merger and integration costs; severance costs; gains or losses from the sale of businesses, certain assets and investments; and certain discrete tax benefits and expenses. The company estimates that amortization expense in 2025 with respect to acquired intangible assets will decrease approximately 5% compared to the amount incurred in 2024. Other adjustments to the company's financial measures that were incurred in 2024 and for the three and six months ended June 30, 2025 are presented in this news release; however, they are not necessarily indicative of adjustments that may be incurred throughout the remainder of 2025 or beyond. Estimates of these impacts and adjustments on a forward-looking basis are not available due to the variability, complexity and limited visibility of these items. Fiserv, Inc. Full Year Forward-Looking Non-GAAP Financial Measures (cont.) The company's adjusted earnings per share growth outlook for 2025 is based on 2024 adjusted earnings per share performance. 2024 GAAP net income attributable to Fiserv $ 3,131 Adjustments: Merger and integration costs 1 81 Severance costs 157 Amortization of acquisition-related intangible assets 2 1,420 Non wholly-owned entity activities 3 100 Impairment of equity method investments 4 635 Non-cash settlement charge for terminated pension plans 5 147 Tax impact of adjustments 6 (548 ) 2024 adjusted net income $ 5,123 Weighted average common shares outstanding - diluted 582.1 2024 GAAP earnings per share attributable to Fiserv - diluted $ 5.38 Adjustments - net of income taxes: Merger and integration costs 1 0.11 Severance costs 0.22 Amortization of acquisition-related intangible assets 2 1.95 Non wholly-owned entity activities 3 0.14 Impairment of equity method investments 4 0.85 Non-cash settlement charge for terminated pension plans 5 0.16 2024 adjusted earnings per share $ 8.80 2025 adjusted earnings per share outlook $10.15 - $10.30 2025 adjusted earnings per share growth outlook 15% - 17% In millions, except per share amounts, unaudited. Earnings per share is calculated using actual, unrounded amounts. See pages 3-4 for disclosures related to the use of non-GAAP financial measures. Fiserv, Inc. Full Year Forward-Looking Non-GAAP Financial Measures (cont.) 1 Represents acquisition and related integration costs incurred in connection with acquisitions. Merger and integration costs associated with integration activities primarily include $23 million of third-party professional service fees, $22 million of share-based compensation, and $14 million related to a legal settlement. 2 Represents amortization of intangible assets acquired through acquisition, including customer relationships, software/technology and trade names. This adjustment does not exclude the amortization of other intangible assets such as contract costs (sales commissions and deferred conversion costs), capitalized and purchased software, financing costs and debt discounts. 3 Represents the company's share of amortization of acquisition-related intangible assets at its unconsolidated affiliates, as well as the minority interest share of amortization of acquisition-related intangible assets at its subsidiaries in which the company holds a controlling financial interest. 4 Represents a non-cash impairment of certain equity method investments, primarily related to the company's Wells Fargo Merchant Services joint venture, recorded within loss from investments in unconsolidated affiliates in the consolidated statement of income. 5 Represents a non-cash settlement charge associated with the terminations of the company's defined benefit pension plans in the United Kingdom and United States. Settlements of the terminated plans were completed in the fourth quarter of 2024. 6 The tax impact of adjustments is calculated using a tax rate of 20%, which approximates the company's annual effective tax rate, exclusive of actual tax impacts of an aggregate $196 million benefit associated with the impairment of certain equity method investments and the settlement charge for terminated pension plans. FI-G View source version on Contacts For more information contact: Media Relations: Sophia MarshallSenior Vice President, CommunicationsFiserv, Investor Relations: Julie ChariellSenior Vice President, Investor RelationsFiserv, Sign in to access your portfolio
Business Wire
11 hours ago
- Business
- Business Wire
Travel + Leisure Co. Reports Second Quarter 2025 Results
ORLANDO, Fla.--(BUSINESS WIRE)--Travel + Leisure Co. (NYSE:TNL), a leading leisure travel company, today reported second quarter 2025 financial results for the three months ended June 30, 2025. Highlights and outlook include: Net income of $108 million, $1.62 diluted earnings per share, on net revenue of $1.02 billion Adjusted EBITDA of $250 million and Adjusted diluted earnings per share of $1.65 (1) Vacation Ownership revenue of $853 million, a 6 percent increase year-over-year Volume per guest (VPG) of $3,251, a 7 percent increase year-over-year, on a 3 percent increase in tours Expects third quarter Adjusted EBITDA of $250 million to $260 million and reaffirms full-year Adjusted EBITDA guidance of $955 million to $985 million Returned $107 million to shareholders through $37 million of dividends and $70 million of share repurchases 'Thanks to the exceptional work of the entire Travel + Leisure Co. team, we delivered another strong quarter. We saw healthy year-over-year growth in VOI sales, with gains in both tour flow and volume per guest. Our VPG performance remains strong as we ended the quarter above the high end of our guidance range,' said Michael D. Brown, President and CEO of Travel + Leisure Co. 'Our multi-brand strategy continued to gain momentum in the first half of the year. We announced three exciting new projects: a Margaritaville Vacation Club resort in Orlando, a new Sports Illustrated Resorts location in Nashville, and the launch of our new Asia based Accor Vacation Club in Indonesia. These developments underscore the strength of our brand partnerships and our ability to grow and diversify our vacation ownership portfolio.' (1) This press release includes Adjusted EBITDA, Adjusted diluted EPS, Adjusted free cash flow, Gross VOI sales and Adjusted net income, which are measures that are not calculated in accordance with Generally Accepted Accounting Principles in the U.S. ('GAAP'). See "Presentation of Financial Information" and the tables for the definitions and reconciliations of these non-GAAP measures. Forward-looking non-GAAP measures are presented in this press release only on a non-GAAP basis because not all of the information necessary for a quantitative reconciliation is available without unreasonable effort. Expand Business Segment Results Vacation Ownership $ in millions Q2 2025 Q2 2024 % change Revenue $853 $807 6 % Adjusted EBITDA $218 $206 6 % Expand Vacation Ownership revenue increased 6% to $853 million in the second quarter of 2025 compared to the same period in the prior year. Net vacation ownership interest (VOI) sales increased 7% year over year despite a higher provision rate. Gross VOI sales increased 8% driven by a 7% increase in VPG and a 3% increase in tours. Second quarter adjusted EBITDA was $218 million compared to $206 million in the prior year period driven by the revenue growth. Travel and Membership $ in millions Q2 2025 Q2 2024 % change Revenue $166 $177 (6) % Adjusted EBITDA $55 $62 (11) % Expand Travel and Membership revenue decreased 6% to $166 million in the second quarter of 2025 compared to the same period in the prior year. This was driven by a 7% decrease in transaction revenue due to lower exchange transactions. Transactions were impacted by an increasing mix of exchange members with a club affiliation who have a lower transaction propensity. Second quarter Adjusted EBITDA decreased 11% to $55 million compared to the same prior year period. This decrease was driven by a higher mix of travel club transactions, which generate lower margins, partially offset by cost savings resulting from the strategic restructuring at the end of 2024. Balance Sheet and Liquidity Net Debt — On June 25, 2025, the Company refinanced its $1.0 billion revolving credit facility extending maturity from October 2026 to June 2030, and among other things, reducing pricing spreads on borrowings and letters of credit at all pricing levels by 25 basis points. As of June 30, 2025, the Company's leverage ratio for covenant purposes was 3.4x. The Company had $3.6 billion of corporate debt outstanding as of June 30, 2025, which excluded $2.0 billion of non-recourse debt related to its securitized notes receivables portfolio. Timeshare Receivables Financing — During the second quarter of 2025, the Company renewed its $600 million USD timeshare receivables conduit facility, extending the end of the commitment period from September 2025 to August 2027 and making certain other amendments, including to the advance rate. Subsequent to the end of the quarter, the Company closed on a $300 million term securitization transaction with a weighted average coupon of 5.10% and a 98% advance rate. Cash Flow — For the six months ended June 30, 2025, net cash provided by operating activities was $353 million compared to $221 million in the prior year period. Adjusted free cash flow was $123 million for the six months ended June 30, 2025 compared to $112 million in the same period of 2024 due to a decrease in cash utilization for working capital items, partially offset by higher net payments on non-recourse debt. Share Repurchases — During the second quarter of 2025, the Company repurchased 1.5 million shares of common stock for $70 million at a weighted average price of $46.75 per share. As of June 30, 2025, the Company had $303 million remaining in its share repurchase authorization. Dividend — The Company paid $37 million ($0.56 per share) in cash dividends on June 30, 2025 to shareholders of record as of June 13, 2025. Management will recommend a third quarter dividend of $0.56 per share for approval by the Company's Board of Directors in August 2025. Outlook The Company is providing guidance for the third quarter 2025: Adjusted EBITDA of $250 million to $260 million Gross VOI sales of $650 million to $680 million VPG of $3,200 to $3,250 The Company is providing guidance for the 2025 full year: Adjusted EBITDA of $955 million to $985 million Gross VOI sales of $2.4 billion to $2.5 billion VPG of $3,200 to $3,250 (vs. prior outlook of $3,050 to $3,150) This guidance is presented only on a non-GAAP basis because not all of the information necessary for a quantitative reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measure is available without unreasonable effort, primarily due to uncertainties relating to the occurrence or amount of these adjustments that may arise in the future. Where one or more of the currently unavailable items is applicable, some items could be material, individually or in the aggregate, to GAAP reported results. Conference Call Information Travel + Leisure Co. will hold a conference call with investors to discuss the Company's results and outlook today at 8:00 a.m. ET. Participants may listen to a simultaneous webcast of the conference call, which may be accessed through the Company's website at or by dialing 877-733-4794 ten minutes before the scheduled start time. For those unable to listen to the live broadcast, an archive of the webcast will be available on the Company's website for 90 days beginning at 12:00 p.m. ET today. Presentation of Financial Information Financial information discussed in this press release includes non-GAAP measures such as Adjusted EBITDA, Adjusted diluted EPS, Adjusted free cash flow, gross VOI sales and Adjusted net income, which include or exclude certain items, as well as non-GAAP guidance. The Company utilizes non-GAAP measures, defined in Table 7, on a regular basis to assess performance of its reportable segments and allocate resources. These non-GAAP measures differ from reported GAAP results and are intended to illustrate what management believes are relevant period-over-period comparisons and are helpful to investors when considered with GAAP measures as an additional tool for further understanding and assessing the Company's ongoing operating performance by adjusting for items which in our view do not necessarily reflect ongoing performance. Management also internally uses these measures to assess our operating performance, both absolutely and in comparison to other companies, and in evaluating or making selected compensation decisions. Exclusion of items in the Company's non-GAAP presentation should not be considered an inference that these items are unusual, infrequent or non-recurring. Full reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures for the reported periods appear in the financial tables section of the press release. The Company may use its website as a means of disclosing information concerning its operations, results and prospects, including information which may constitute material nonpublic information, and for complying with its disclosure obligations under SEC Regulation FD. Disclosure of such information will be included on the Company's website in the Investor Relations section at Accordingly, investors should monitor that Investor Relations section of the Company website, in addition to accessing its press releases, its submissions and filings with the SEC, and its publicly noticed conference calls and webcasts. About Travel + Leisure Co. Travel + Leisure Co. (NYSE:TNL) is a leading leisure travel company, providing more than six million vacations to travelers around the world every year. The company operates a portfolio of vacation ownership, travel club, and lifestyle travel brands designed to meet the needs of the modern leisure traveler, whether they're traversing the globe or staying a little closer to home. With hospitality and responsible tourism at its heart, the company's nearly 19,000 dedicated associates around the globe help the company achieve its mission to put the world on vacation. Learn more at Forward-Looking Statements This press release includes 'forward-looking statements' as that term is defined by the Securities and Exchange Commission ('SEC'). Forward-looking statements are any statements other than statements of historical fact, including statements regarding our expectations, beliefs, hopes, intentions or strategies regarding the future. In some cases, forward-looking statements can be identified by the use of words such as 'may,' 'will,' 'expects,' 'should,' 'believes,' 'plans,' 'anticipates,' "intends," 'estimates,' 'predicts,' 'potential,' "projects," 'continue,' 'future,' "outlook," "guidance," "commitments," or other words of similar meaning. Forward-looking statements are subject to risks and uncertainties that could cause actual results of Travel + Leisure Co. and its subsidiaries ('Travel + Leisure Co.' or 'we') to differ materially from those discussed in, or implied by, the forward-looking statements. Factors that might cause such a difference include, but are not limited to, risks associated with: the acquisition of the Travel + Leisure brand and the future prospects and plans for Travel + Leisure Co., including our ability to execute our strategies to grow our cornerstone timeshare and exchange businesses and expand into the broader leisure travel industry through our travel clubs; our ability to compete in the highly competitive timeshare and leisure travel industries; uncertainties related to acquisitions, dispositions and other strategic transactions; the health of the travel industry and declines or disruptions caused by adverse economic conditions (including inflation, recent tariff and other trade restrictions, higher interest rates, and recessionary pressures), travel restrictions, terrorism or acts of gun violence, political strife, war (including hostilities in Ukraine and the Middle East), pandemics, and severe weather events and other natural disasters; adverse changes in consumer travel and vacation patterns, consumer preferences and demand for our products; increased or unanticipated operating costs and other inherent business risks; our ability to comply with financial and restrictive covenants under our indebtedness; our ability to access capital and insurance markets on reasonable terms, at a reasonable cost or at all; maintaining the integrity of internal or customer data and protecting our systems from cyber-attacks; the timing and amount of future dividends and share repurchases, if any; and those other factors disclosed as risks under 'Risk Factors' in documents we have filed with the SEC, including in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 19, 2025. We caution readers that any such statements are based on currently available operational, financial and competitive information, and they should not place undue reliance on these forward-looking statements, which reflect management's opinion only as of the date on which they were made. Except as required by law, we undertake no obligation to review or update these forward-looking statements to reflect events or circumstances as they occur. Table 1 Travel + Leisure Co. Condensed Consolidated Statements of Income (Unaudited) (in millions, except per share amounts) Three Months Ended Six Months Ended June 30, June 30, 2025 2024 2025 2024 Net Revenues Net VOI sales $ 474 $ 441 $ 858 $ 810 Service and membership fees 407 413 823 832 Consumer financing 112 111 224 221 Other 25 20 46 37 Net revenues 1,018 985 1,951 1,900 Expenses Operating 457 442 902 880 Marketing 152 144 276 265 General and administrative 116 128 236 239 Consumer financing interest 34 33 68 66 Depreciation and amortization 31 28 61 56 Cost of vacation ownership interests 21 21 45 55 Asset impairments, net 1 — 1 — Total expenses 812 796 1,589 1,561 Operating income 206 189 362 339 Interest expense 57 63 115 127 Other (income), net (1 ) (4 ) (2 ) (5 ) Interest (income) (2 ) (3 ) (4 ) (8 ) Income before income taxes 152 133 253 225 Provision for income taxes 44 36 72 62 Net income from continuing operations 108 97 181 163 Gain on disposal of discontinued business, net of income taxes — 32 — 32 Net income attributable to Travel + Leisure Co. shareholders $ 108 $ 129 $ 181 $ 195 Basic earnings per share Continuing operations $ 1.63 $ 1.36 $ 2.71 $ 2.29 Discontinued operations — 0.46 — 0.45 $ 1.63 $ 1.82 $ 2.71 $ 2.74 Diluted earnings per share Continuing operations $ 1.62 $ 1.36 $ 2.68 $ 2.28 Discontinued operations — 0.45 — 0.45 $ 1.62 $ 1.81 $ 2.68 $ 2.73 Weighted average shares outstanding Basic 66.1 70.8 66.6 71.2 Diluted 66.5 71.0 67.3 71.5 Expand Table 2 Travel + Leisure Co. Condensed Consolidated Balance Sheets (Unaudited) (in millions, except share data) June 30, 2025 December 31, 2024 Assets Cash and cash equivalents $ 212 $ 167 Restricted cash 175 162 Trade receivables, net 175 155 Vacation ownership contract receivables, net 2,568 2,619 Inventory 1,252 1,227 Prepaid expenses 244 214 Property and equipment, net 592 591 Goodwill 972 966 Other intangibles, net 208 209 Other assets 411 425 Total assets $ 6,809 $ 6,735 Liabilities and (deficit) Accounts payable $ 69 $ 67 Accrued expenses and other liabilities 778 778 Deferred income 483 457 Non-recourse vacation ownership debt 1,959 2,123 Debt 3,628 3,468 Deferred income taxes 745 722 Total liabilities 7,662 7,615 Stockholders' (deficit): Preferred stock, $0.01 par value, authorized 6,000,000 shares, none issued and outstanding — — Common stock, $0.01 par value, 600,000,000 shares authorized, 225,320,707 issued as of 2025 and 224,599,556 as of 2024 3 2 Treasury stock, at cost – 160,313,284 shares as of 2025 and 157,476,502 shares as of 2024 (7,574 ) (7,433 ) Additional paid-in capital 4,348 4,328 Retained earnings 2,437 2,334 Accumulated other comprehensive loss (66 ) (112 ) Total stockholders' (deficit) (852 ) (881 ) Noncontrolling interest (1 ) 1 Total (deficit) (853 ) (880 ) Total liabilities and (deficit) $ 6,809 $ 6,735 Expand Table 3 Travel + Leisure Co. Condensed Consolidated Statements of Cash Flows (Unaudited) (in millions) Six Months Ended June 30, 2025 2024 Operating activities Net income $ 181 $ 195 Gain on disposal of discontinued business, net of income taxes — (32 ) Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 219 191 Depreciation and amortization 61 56 Stock-based compensation 26 20 Deferred income taxes 23 24 Non-cash interest 12 12 Non-cash lease expense 7 6 Asset impairments 1 — Other, net (2 ) (1 ) Net change in assets and liabilities, excluding the impact of acquisitions and dispositions: Trade receivables (14 ) 13 Vacation ownership contract receivables (161 ) (235 ) Inventory (16 ) (2 ) Prepaid expenses (27 ) (24 ) Other assets 18 4 Accounts payable, accrued expenses, and other liabilities 5 (14 ) Deferred income 20 8 Net cash provided by operating activities 353 221 Investing activities Property and equipment additions (58 ) (38 ) Proceeds from the sale of investments 15 — Purchase of investments (4 ) — Acquisitions, net of cash acquired (1 ) (44 ) Proceeds from sale of assets — 1 Net cash used in investing activities (48 ) (81 ) Financing activities Proceeds from non-recourse vacation ownership debt 644 657 Principal payments on non-recourse vacation ownership debt (816 ) (728 ) Proceeds from debt 1,253 949 Principal payments on debt (1,095 ) (650 ) Repayment of notes and term loans (4 ) (304 ) Repurchase of common stock (140 ) (94 ) Dividends paid to shareholders (78 ) (73 ) Net share settlement of incentive equity awards (13 ) (9 ) Debt issuance/modification costs (12 ) (7 ) Payment of deferred acquisition consideration — (9 ) Proceeds from issuance of common stock 7 7 Other, net (1 ) — Net cash used in financing activities (255 ) (261 ) Effect of changes in exchange rates on cash, cash equivalents and restricted cash 8 (5 ) Net change in cash, cash equivalents and restricted cash 58 (126 ) Cash, cash equivalents and restricted cash, beginning of period 329 458 Cash, cash equivalents and restricted cash, end of period 387 332 Less: Restricted cash 175 166 Cash and cash equivalents $ 212 $ 166 Expand Table 4 Travel + Leisure Co. Summary Data Sheet (in millions, except per share amounts, unless otherwise indicated) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 Change 2025 2024 Change Consolidated Results Net income attributable to TNL shareholders $ 108 $ 129 (16 )% $ 181 $ 195 (7 )% Diluted earnings per share $ 1.62 $ 1.81 (10 )% $ 2.68 $ 2.73 (2 )% Net income from continuing operations $ 108 $ 97 11 % $ 181 $ 163 11 % Diluted earnings per share from continuing operations $ 1.62 $ 1.36 19 % $ 2.68 $ 2.28 18 % Net income margin 10.6 % 13.1 % 9.3 % 10.3 % Adjusted Earnings Adjusted EBITDA $ 250 $ 244 2 % $ 452 $ 435 4 % Adjusted net income $ 110 $ 108 2 % $ 185 $ 177 5 % Adjusted diluted earnings per share $ 1.65 $ 1.52 9 % $ 2.75 $ 2.48 11 % Segment Results Net Revenues Vacation Ownership $ 853 $ 807 6 % $ 1,609 $ 1,533 5 % Travel and Membership 166 177 (6 )% 345 370 (7 )% Corporate and other (1 ) 1 (3 ) (3 ) Total $ 1,018 $ 985 3 % $ 1,951 $ 1,900 3 % Adjusted EBITDA Vacation Ownership $ 218 $ 206 6 % $ 378 $ 340 11 % Travel and Membership 55 62 (11 )% 123 137 (10 )% Segment Adjusted EBITDA 273 268 501 477 Corporate and other (23 ) (24 ) (49 ) (42 ) Total Adjusted EBITDA $ 250 $ 244 2 % $ 452 $ 435 4 % Adjusted EBITDA margin 24.6 % 24.8 % 23.2 % 22.9 % Expand Note: Amounts may not calculate due to rounding. See "Presentation of Financial Information" and Table 7 for Non-GAAP definitions. For a full reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures, refer to Table 5. Expand Table 4 (continued) Travel + Leisure Co. Summary Data Sheet (in millions, unless otherwise indicated) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 Change 2025 2024 Change Vacation Ownership Net VOI sales $ 474 $ 441 7 % $ 858 $ 810 6 % Loan loss provision 128 113 13 % 219 191 15 % Gross VOI sales, net of Fee-for-Service sales 602 554 9 % 1,077 1,001 8 % Fee-for-Service sales 52 53 (2 )% 89 95 (7 )% Gross VOI sales $ 654 $ 607 8 % $ 1,166 $ 1,096 6 % Tours (in thousands) 197 192 3 % 350 347 1 % VPG (in dollars) $ 3,251 $ 3,051 7 % $ 3,234 $ 3,044 6 % Tour generated VOI sales $ 641 $ 586 9 % $ 1,133 $ 1,055 7 % Telesales and other 13 21 (36 )% 33 41 (21 )% Gross VOI sales $ 654 $ 607 8 % $ 1,166 $ 1,096 6 % Net VOI sales $ 474 $ 441 7 % $ 858 $ 810 6 % Property management revenue 217 210 3 % 440 421 5 % Consumer financing 112 111 1 % 224 221 1 % Other (a) 50 45 11 % 87 81 7 % Total Vacation Ownership revenue $ 853 $ 807 6 % $ 1,609 $ 1,533 5 % Travel and Membership Avg. number of exchange members (in thousands) 3,329 3,450 (4 )% 3,346 3,472 (4 )% Transactions (in thousands) 197 220 (11 )% 437 495 (12 )% Revenue per transaction (in dollars) $ 370 $ 366 1 % $ 361 $ 357 1 % Exchange transaction revenue $ 73 $ 81 (10 )% $ 157 $ 177 (11 )% Transactions (in thousands) 191 179 7 % 367 349 5 % Revenue per transaction (in dollars) $ 229 $ 251 (9 )% $ 242 $ 254 (5 )% Travel Club transaction revenue $ 44 $ 45 (2 )% $ 89 $ 89 — % Transactions (in thousands) 388 399 (3 )% 804 844 (5 )% Revenue per transaction (in dollars) $ 300 $ 315 (5 )% $ 306 $ 315 (3 )% Travel and Membership transaction revenue $ 117 $ 126 (7 )% $ 246 $ 266 (8 )% Transaction revenue $ 117 $ 126 (7 )% $ 246 $ 266 (8 )% Subscription revenue 43 44 (2 )% 86 90 (4 )% Other (b) 6 7 (14 )% 13 14 (7 )% Total Travel and Membership revenue $ 166 $ 177 (6 )% $ 345 $ 370 (7 )% Expand Note: Amounts may not compute due to rounding. (a) Includes Fee-for-Service commission revenues and other ancillary revenues. (b) Primarily related to cancellation fees, commissions, and other ancillary revenue. Expand Table 5 Travel + Leisure Co. Non-GAAP Measure: Reconciliation of Net Income to Adjusted Net Income to Adjusted EBITDA (in millions, except diluted per share amounts) Three Months Ended June 30, 2025 EPS Margin % 2024 EPS Margin % Net income attributable to TNL shareholders $ 108 $ 1.62 10.6% $ 129 $ 1.81 13.1% Gain on disposal of discontinued business, net of income taxes — (32) Net income from continuing operations $ 108 $ 1.62 10.6% $ 97 $ 1.36 9.8% Amortization of acquired intangibles (a) 3 2 Asset impairments, net 1 — Legacy items (1) 12 Taxes (b) (1) (4) Adjusted net income $ 110 $ 1.65 10.8% $ 108 $ 1.52 11.0% Income taxes on adjusted net income 45 40 Interest expense 57 63 Depreciation 28 26 Stock-based compensation expense (c) 12 11 Interest income (2) (3) Adjusted EBITDA $ 250 24.6% $ 244 24.8% Diluted Shares Outstanding 66.5 71.0 Six Months Ended June 30, 2025 EPS Margin % 2024 EPS Margin % Net income attributable to TNL shareholders $ 181 $ 2.68 9.3% $ 195 $ 2.73 10.3% Gain on disposal of discontinued business, net of income taxes — (32) Net income from continuing operations $ 181 $ 2.68 9.3% $ 163 $ 2.28 8.6% Amortization of acquired intangibles (a) 5 5 Asset impairments, net 1 — Legacy items — 13 Acquisition-related deal costs — 2 Taxes (b) (2) (6) Adjusted net income $ 185 $ 2.75 9.5% $ 177 $ 2.48 9.3% Income taxes on adjusted net income 74 68 Interest expense 115 127 Depreciation 56 51 Stock-based compensation expense (c) 26 20 Interest income (4) (8) Adjusted EBITDA $ 452 23.2% $ 435 22.9% Diluted Shares Outstanding 67.3 71.5 Expand Amounts may not calculate due to rounding. The tables above reconcile certain non-GAAP financial measures to their closest GAAP measure. The presentation of these adjustments is intended to permit the comparison of particular adjustments as they appear in the income statement in order to assist investors' understanding of the overall impact of such adjustments. In addition to GAAP financial measures, the Company provides Adjusted net income, Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted diluted EPS to assist our investors in evaluating our ongoing operating performance for the current reporting period and, where provided, over different reporting periods, by adjusting for certain items which in our view do not necessarily reflect ongoing performance. We also internally use these measures to assess our operating performance, both absolutely and in comparison to other companies, and in evaluating or making selected compensation decisions. These supplemental disclosures are in addition to GAAP reported measures. Non-GAAP measures should not be considered a substitute for, nor superior to, financial results and measures determined or calculated in accordance with GAAP. Our presentation of adjusted measures may not be comparable to similarly-titled measures used by other companies. See "Presentation of Financial Information" and Table 7 for the definitions of these non-GAAP measures. (a) Amortization of acquisition-related intangible assets is excluded from Adjusted net income and Adjusted EBITDA. (b) Represents the tax effects on the adjustments. We determine the tax effects of the non-GAAP adjustments based on the nature of the underlying adjustment and the relevant tax jurisdictions. The tax effect of the non-GAAP adjustments was calculated based on an evaluation of the statutory tax treatment and the applicable statutory tax rate in the relevant jurisdictions. (c) All stock-based compensation is excluded from Adjusted EBITDA. Expand Table 6 Travel + Leisure Co. Non-GAAP Measure: Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow (in millions) Six Months Ended June 30, 2025 2024 Net cash provided by operating activities $ 353 $ 221 Property and equipment additions (58 ) (38 ) Sum of proceeds and principal payments of non-recourse vacation ownership debt (172 ) (71 ) Free cash flow / Adjusted free cash flow (a) $ 123 $ 112 Expand (a) The Company had $48 million and $81 million of net cash used in investing activities during the six months ended June 30, 2025 and 2024. The Company had $255 million and $261 million of net cash used in financing activities for the six months ended June 30, 2025 and 2024. Expand Table 7 Definitions Adjusted Diluted Earnings per Share: A non-GAAP measure, defined by the Company as Adjusted net income divided by the diluted weighted average number of common shares. Adjusted Diluted Earnings per Share is useful to assist our investors in evaluating our ongoing operating performance for the current reporting period and, where provided, over different reporting periods. Adjusted EBITDA: A non-GAAP measure, defined by the Company as net income from continuing operations before depreciation and amortization, interest expense (excluding consumer financing interest), early extinguishment of debt, interest income (excluding consumer financing revenues) and income taxes, each of which is presented on the Condensed Consolidated Statements of Income. Adjusted EBITDA also excludes stock-based compensation costs, separation and restructuring costs, legacy items, transaction and integration costs associated with mergers, acquisitions, and divestitures, asset impairments/recoveries, gains and losses on sale/disposition of business, and items that meet the conditions of unusual and/or infrequent. Legacy items include the resolution of and adjustments to certain contingent assets and liabilities related to acquisitions of continuing businesses and dispositions, including the separation of Wyndham Hotels & Resorts, Inc. and Avis Budget Group, Inc. (ABG), and the sale of the vacation rentals businesses. Integration costs represent certain non-recurring costs directly incurred to integrate mergers and/or acquisitions into the existing business. We believe that when considered with GAAP measures, Adjusted EBITDA is useful to assist our investors in evaluating our ongoing operating performance for the current reporting period and, where provided, over different reporting periods. We also internally use these measures to assess our operating performance, both absolutely and in comparison to other companies, and in evaluating or making selected compensation decisions. Adjusted EBITDA should not be considered in isolation or as a substitute for net income/(loss) or other income statement data prepared in accordance with GAAP and our presentation of Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies. Adjusted EBITDA Margin: A non-GAAP measure, represents Adjusted EBITDA as a percentage of revenue. Adjusted EBITDA Margin is useful to assist our investors in evaluating our ongoing operating performance for the current reporting period and, where provided, over different reporting periods. Adjusted Free Cash Flow: A non-GAAP measure, defined by the Company as net cash provided by operating activities from continuing operations less property and equipment additions (capital expenditures) plus the sum of proceeds and principal payments of non-recourse vacation ownership debt, while also adding back cash paid for transaction costs for acquisitions and divestitures, separation adjustments associated with the spin-off of Wyndham Hotels, and certain adjustments related to COVID-19. TNL believes adjusted FCF to be a useful operating performance measure to evaluate the ability of its operations to generate cash for uses other than capital expenditures and, after debt service and other obligations, its ability to grow its business through acquisitions and equity investments, as well as its ability to return cash to shareholders through dividends and share repurchases. A limitation of using Adjusted free cash flow versus the GAAP measure of net cash provided by operating activities as a means for evaluating TNL is that Adjusted free cash flow does not represent the total cash movement for the period as detailed in the consolidated statement of cash flows. Adjusted Free Cash Flow Conversion: A non-GAAP measure, defined by the Company as Adjusted free cash flow as a percentage of Adjusted EBITDA. We use this non-GAAP performance measure to assist in evaluating our operating performance and the quality of our earnings as represented by adjusted EBITDA, and to evaluate the performance of our current and prospective operating and strategic initiatives in generating cash flows from our earnings performance. This measure also assists investors in evaluating our operating performance, management of our assets, and ability to generate cash flows from our earnings, as well as facilitating period-to-period comparisons. Adjusted Net Income: A non-GAAP measure, defined by the Company as net income from continuing operations adjusted to exclude separation and restructuring costs, legacy items, transaction and integration costs associated with mergers, acquisitions, and divestitures, amortization of acquisition-related assets, debt modification costs, impairments, gains and losses on sale/disposition of business, and items that meet the conditions of unusual and/or infrequent and the tax effect of such adjustments. Legacy items include the resolution of and adjustments to certain contingent assets and liabilities related to acquisitions of continuing businesses and dispositions, including the separation of Wyndham Hotels and ABG, and the sale of the vacation rentals businesses. Adjusted Net Income is useful to assist our investors in evaluating our ongoing operating performance for the current reporting period and, where provided, over different reporting periods. Average Number of Exchange Members: Represents the average number of paid members in our vacation exchange programs who are considered to be in good standing, during a given reporting period. Free Cash Flow (FCF): A non-GAAP measure, defined by TNL as net cash provided by operating activities from continuing operations less property and equipment additions (capital expenditures) plus the sum of proceeds and principal payments of non-recourse vacation ownership debt. TNL believes FCF to be a useful operating performance measure to evaluate the ability of its operations to generate cash for uses other than capital expenditures and, after debt service and other obligations, its ability to grow its business through acquisitions and equity investments, as well as its ability to return cash to shareholders through dividends and share repurchases. A limitation of using FCF versus the GAAP measure of net cash provided by operating activities as a means for evaluating TNL is that FCF does not represent the total cash movement for the period as detailed in the consolidated statement of cash flows. Gross Vacation Ownership Interest Sales: A non-GAAP measure, represents sales of vacation ownership interests (VOIs), including sales under the fee-for-service program before the effect of loan loss provisions. We believe that Gross VOI sales provide an enhanced understanding of the performance of our vacation ownership business because it directly measures the sales volume of this business during a given reporting period. Leverage Ratio: The Company calculates leverage ratio as net debt divided by Adjusted EBITDA as defined in the credit agreement. Net Debt: Net debt equals total debt outstanding, less non-recourse vacation ownership debt and cash and cash equivalents. Tours: Represents the number of tours taken by guests in our efforts to sell VOIs. Travel and Membership Revenue per Transaction: Represents transaction revenue divided by transactions, provided in two categories; Exchange, which is primarily RCI, and Travel Club. Travel and Membership Transactions: Represents the number of exchanges and travel bookings recognized as revenue during the period, net of cancellations. This measure is provided in two categories; Exchange, which is primarily RCI, and Travel Club. Volume Per Guest (VPG): Represents Gross VOI sales (excluding telesales and virtual sales) divided by the number of tours. The Company has excluded non-tour sales in the calculation of VPG because non-tour sales are generated by a different marketing channel. We believe that VPG provides an enhanced understanding of the performance of our Vacation Ownership business because it directly measures the efficiency of its tour selling efforts during a given reporting period.
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Capital One shares climb as investors buy into the vision of its future with Discover
Capital One shares rose on Tuesday evening despite the company reporting an extremely noisy second-quarter result due to the Discover integration. Still, we like where the company is headed with this game-changing acquisition. Revenue in the three months ended June 30 increased 31% year over year to $12.5 billion, missing the consensus estimate of $12.7 billion, according to LSEG. Adjusted earning per share (EPS) increased 75% year over year to $5.48, exceeding the $3.72 estimate, LSEG data showed. Shares are trading up about 3% in extended trading Tuesday night to around $224 per share. If the stock closes above $220.91 on Wednesday, it will mark a new all-time high. Bottom line This was not the easiest quarter to judge, but long-term benefits of owning Discover are easy to see. The blockbuster Discover acquisition, which closed on May 18, required a lot of different accounting treatments and analyst estimates were all over the board. For example, Capital One actually reported a quarterly net loss of $4.3 billion, or $8.58 per share, based on Generally Acceptable Accounting Principles (GAAP) — but, on an adjusted basis to strip out one-time impact from the deal, the company turned a huge profit of $5.48 per share. One of the largest financial impacts from the deal was the $8.8 billion worth of initial allowance build for Discover's non-purchased credit deteriorated loans. The accounting treatment for Discover's book of business is why there was a significant increase in the reported companywide provision for credit losses. Provisions for credit losses are funds that Capital One sets aside to cover potential loan defaults; the higher the provisions, the worse sign of credit quality. Backing out the Discover provisions tells a different story. If it was still a standalone company, Capital One would have had an allowance release of around $900 million, which is a great sign of improving credit trends. This is a big difference, to say the least. Capital One Financial Why we own it : Capital One's acquisition of Discover is a transformative deal with significant strategic advantages and financial benefits. There are also several billions of dollars worth of expense and network synergies that should make this deal highly accretive to earnings per share. Lastly, the acquisition strengthens Capital One's balance sheet, allowing for aggressive share repurchases in the future. Competitors : American Express, MasterCard, Visa Most recent buy : May 23, 2025 Initiated : March 6, 2025 Beyond the nitty gritty of the credit metrics, the focus of Tuesday night's earnings call was all about the Discover integration and what management's plans are now that it owns a payments network — the most coveted part of the $35 billion acquisition. As CEO Richard Fairbank proudly pointed out, "There are only two banks in the world with their own network, and we are one of them. We are moving to capitalize on this rare and valuable opportunity." American Express is the other. Our thesis is that the Discover acquisition will boost Capital One's earnings power and expand its price-to-earnings multiple. With the integration just getting started, the stock remains undervalued. Although Capital One will have to invest aggressively to achieve its vision, those returns should be worth the costs and help the company grow sustainably for years. We're reiterating our buy-equivalent 1 rating and price target of $250. Deal outlook On the earnings call, the company provided some early thoughts on the how Discover integration is progressing. Broadly speaking, the integration "is off to a great start," and that's good to hear since so much of our thesis hinges on this deal being a success. However, management now expects integration costs to be "somewhat higher" than its previous announced target of $2.8 billion, which is a slightly negative development. According to Fairbank, the "integration budget" covers expenses like deal costs; moving Discover onto Capital One's tech stack; integrating products and experience; additional investments in risk management and compliance; integrating talent; and taking care of employees. In addition to the higher cost outlook, the phrase "sustained investment" came up multiple times on the conference call. Fears of endless spending to make the deal work could spook some investors. However, the firm believes these sustained investments will lead to sustained growth and stronger returns for the long run. "The portfolio of opportunities we have is the broadest and biggest set of opportunities that I've seen in our history. But the only way to get there is with investment," Fairbank said — and we're banking on Fairbank being right. "I think there's a lot of value creation opportunity, but we're going to invest significantly to get there," he later added. On the synergy side, Capital One said it's on track to hit its target of $2.5 billion of net synergies, which is made up of cost savings and revenue synergies generated by moving its debit business and some of its credit business onto the Discover network. Capital One began the process of reissuing Capital One debt cards onto that network last month, Fairbank said. The conversion process will continue "in phases through early 2026," he said. Longer term, the company sees a significant opportunity to invest in the network to achieve greater international acceptance and build a global network brand. Management wants to do this to lure bigger spenders onto the Discover network, and doing so could eventually could help the company exceed its synergy targets , Fairbank has said. Commentary As mentioned earlier, the actual quarterly results were hard to evaluate versus expectations because the estimates themselves varied tremendously. Analysts need time to fine-tune their models for the combined company. For that reason, we're not putting too much stock into all the red seen in the chart above. The bearish view on Capital One is that the tariff-driven plunge in consumer sentiment would hurt the economy and materially impact Capital One's credit performance. Since Capital One is one of the more exposed credit card companies to subprime, it's usually the first to feel the pain of an economic slowdown. And yet, the bank's credit performance has been healthy and steadily getting better. "Capital One's card delinquencies have been improving on a seasonally adjusted basis since October of last year, and our losses have been improving since January of 2025," Fairbank said on the call. Capital One's "legacy" domestic card portfolio, which does not include Discover, also saw its net charge off rate decline 55 basis points year over year to 5.5%. Net charge-offs refer to the amount of debt a bank has written off as uncollectible, minus any recoveries. A decline is a good thing. Toward the end of Tuesday night's call, Fairbank spoke more generally about the health of the U.S. consumer and economy, striking an upbeat tone. "If we don't read the news and just look at what our customers are telling us with their behaviors, it is a picture of strength," he said. As for buybacks, the company repurchased $150 million worth of stock in the quarter, bringing its full-year total to $300 million. Following another successful round of Federal Reserve stress tests in June, there's a lot of potential here for years of multibillion dollar buybacks. But management is still working through the internal modeling of the combined company, and they plan on making an update once that is complete. (Jim Cramer's Charitable Trust is long COF. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
